Weak Recovery Seen in Indian Output

Held back by weak demand at home and abroad, Indian industrial output probably made a tepid recovery late last year, underscoring the challenges faced in 2015 by Prime Minister Narendra Modi as he seeks to woo global investors this week.

To accelerate the recovery in Asia’s third largest economy from its longest slowdown since the 1980s, Modi has pushed through a raft of economic reforms, mostly by executive orders.  But global headwinds, lukewarm domestic demand and unused industrial capacity mean capital investment has not picked up and the economy remains way below potential.

Retail inflation – still a major issue for Asia’s third largest economy though it fell to an all time low in November – probably rose sharply in December fuelled by higher food prices.  Analysts say there still remains a good chance that the Reserve Bank of India will cut interest rates, possibly after the government presents its annual budget in late February.


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